Business Directories

New Gulf Air CEO should cut costs: MPs

Manama, August 3, 2009

The new chief executive of Gulf Air should cut costs to reduce the losses of Bahrain's state-owned carrier, but laying off nationals in large numbers remains off-limits, members of parliament said on Monday.

Samer Majali, former chief executive of Royal Jordanian, on Sunday took his post at the helm of Gulf Air, which has 35 Airbus planes and 16 Boeing 787 Dreamliner aircraft on order, after previous chief executive Bjorn Naf left the airline in July.

"I request from Mr Majali to secure the jobs of Bahrainis and cut only where necessary in the high rank jobs", said Ghanem Al-Buainain, first vice speaker of Bahrain's parliament.

Three chief executives have attempted to turn around Gulf Air since 2002, cutting jobs and realigning its network as previous shareholders Abu Dhabi, Qatar and Oman gave up their stakes in the ailing carrier.

But efforts to resurrect the company, one of the largest employers in the country, have been hampered by political opposition to measures seen too drastic. Naf was under constant criticism from parliament, in particular for favouring foreigners for management positions.

"I personally was impressed with what Naf did, but local politics didn't give him the chance (to stay longer)", said Jassim Husain Ali, a member of parliament's financial and economic affairs committee.

He said he expects the company to post between $200 million and $300 million in losses this year and said Majali should focus on cutting costs by reducing the number of agents by enhancing internet bookings and closing unprofitable routes.

"Some jobs will have to be cut as well, there's no doubt about that," he said. But Ali said laying off Bahrainis, except those close to retirement age, would not be accepted by public opinion. "Certainly that would not be acceptable," he said.

Sami Ali Qambar, also a member of the economic committee, said Majali was the right choice for the company, but that job cuts needed to be done very carefully and could then include Bahrainis.

"If a Bahraini is not working properly, he has no position in the company," he said.

Gulf Air is competing with regional peers such as Emirates Airlines and Qatar Airways, which have established themselves as airlines serving passenger traffic between Asia and Europe.

Majali is credited with turning around Royal Jordanian, enabling the government to sell a 71 percent stake to investors in an Initial Public Offering (IPO) at the end of 2007. The airline posted $10.86 million net profit for the first six months of this year. Majali has not yet said in public in which direction he will take Gulf Air, which flew almost 6 million passengers in 2008.

Mumtalakat, Bahrain's sovereign wealth fund, said last week it is seeking advisors to help it rebuild the airline.

"Majali did a good job in turning around Royal Jordanian," said Kareem Murad, airline lead analyst at Shuaa Capital. He said it was Majali's strength to focus Royal Jordanian on improving connections in the Levant, finding the right niche for the company while not trying to punch above its weight in global competition.

"Maybe he will apply the same concept," he said, adding that long-haul markets are mostly divided between airlines and that Majali therefore would probably seek to grow in the regional market and on connections to India.

Murad said that Majali in Jordan delivered lay-offs to improve efficiency even though the carrier was also expected by politicians to provide jobs. - Reuters